Enterprise Investment Scheme data points to continued investor appetite for early stage businesses.

Data released (29 May 2020) by Government covering the level of private investment during 2018/19 under the tax advantaged Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) indicates that private investors continue to play their part in supporting early stage growth businesses.

There had been concern that the changes to the Scheme rules, to exclude asset backed businesses from eligibility under the scheme, would have seen many investors looking elsewhere for tax efficient investments.

But according to the Enterprise Investment Scheme Association (EISA) this has not been the case.

Director General of the EISA, Mark Brownridge commented, “2018/2019 is the first full year that captures the risk to capital changes made at the Patient Capital Review that removed asset backed EIS investment to ensure EIS was focused on entrepreneurial seeking to grow and develop. Given that the asset backed section of the EIS market traditionally raised in the region of £300-£400M it is perhaps surprising, and at the same time very pleasing, to see such a small fall in the total investment into EIS. My own estimates were of a far deeper cutback. It was suggested at the time the risk to capital condition was introduced that those investors who were purely tax motivated and had been weaned on asset backed deals would leave the EIS market and invest their money elsewhere but the figures suggest these fears have largely been misplaced.”

A key statistic that stands out is the relatively sharp fall in companies raising funds through EIS for the first time.

“The long-term average,’ Mark Brownridge points out, “is 53% but in 2018/2019 this fell to 28%. Again, as HMRC outline, it would seem that this is as a consequence of the risk to capital condition. Old style asset backed and capital preservation EIS investments were often predicated on setting up new companies to hothouse the investment so the risk to capital condition seems to have been successful in flushing these out.”

On the positive side the number of Advance Assurance requests has increased in 2019/2020 reflecting the increased interest in EIS and SEIS funding by companies.

“All in all, the statistics show how resilient EIS and SEIS are, having navigated a period of upheaval and legislative change. Given the scope and far reaching changes that were introduced by the risk to capital condition in 2018, the statistics show that the EIS and SEIS market has remained not only stable but positively buoyant. New challenges are of course now being presented, in the form of the coronavirus pandemic, but no doubt EIS and SEIS will rise to this challenge too and EISA continue to lobby hard to ensure EIS and SEIS can play a significant part in supporting small, innovative companies towards recovery and growth.” says Mark Brownridge.


About EISA

Enterprise Investment Scheme Association (EISA) is a not-for-profit organisation that helps Small and Medium-sized Enterprises (SME’s) obtain the funding they need to grow their business and help drive our economy forward. EISA membership represents all areas of the EIS/SEIS industry including EIS/SEIS Fund Managers, Lawyers, Accountants, Tax Advisers, Corporate Financiers, Financial Planners and Wealth Managers, throughout the UK.


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